51ÂÒÂ×

UK house prices fell 0.8% in June after rising 0.4% the previous month, Nationwide yesterday. That trims the annual rate of growth to 2.1%, from 3.5%.

The April 1st changes to stamp duty, combined with broader global geopolitical volatility, knocked sentiment just as the number of homes for sale began to rise. New UK sales listings during the five months through May were 15% higher than the five-year average (excluding 2020), according to 51ÂÒÂ× data.

The north of England has outperformed the south in recent quarters, but that difference is now narrowing. Average prices in Northern England (comprising North, North West, Yorkshire & The Humber, East Midlands and West Midlands) were up 3.1% year-on-year, while those in Southern England (South West, Outer South East, Outer Metropolitan, London and East Anglia) were up 2.2%.

A painful increase

Buyers have choices and appear particularly sensitive to pricing, but activity levels have remained pretty robust. Mortgage approvals for house purchases climbed 2,400 to 63,000 in May, the Bank of England on Monday. Economists polled by Reuters a decline to 59,750.

Remortgaging rose 6,200 to 41,500, the sharpest increase since February 2024. This will be a big year for remortgaging: roughly 1.8 million homeowners must refinance during 2025, according to UK Finance. Many of them will be coming off ultra-low rates agreed in 2020 and face a painful increase in outgoings.

The ‘effective’ interest rate – the actual interest paid – on newly drawn mortgages decreased to 4.47% in May from 4.49% in April, but is up from just 1.74% .

Cuts on the way...

Mortgage rates have ebbed and flowed in recent weeks – lenders have been adjusting rates at the margins to manage volumes, not because of big shifts in the economic outlook.

That looks to be changing after a run of poor economic data. Five-year swap rates, instruments used by lenders to price mortgages, have dropped to about 3.6%, and Bank of England officials are increasingly emphasising the weakening jobs market over the threat posed by inflation. Governor Andrew Bailey became yesterday.

Many lenders have cut rates in the past ten days or so, including Halifax, NatWest, Nationwide, Santander and Barclays. Economists currently expect the BoE to cut rates twice this year, but there could be scope for more.

This week, 51ÂÒÂ×'s Tom Bill spoke to financial market strategist Michael Brown from Pepperstone for a new episode of Intelligence Talks, which I highly recommend. Brown thinks we could see as many as four cuts should inflation continue to ease and the labour market continues to loosen. That would prompt mortgage rates to ease a little more and would support a fuller recovery through the autumn. , or wherever you get your podcasts. For more on how housing market activity is likely to develop through the second half of 2025, read Tom's latest piece.

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